Digital war on poverty

For a free marketeer like me, the ghastly poverty of the world is a nightmarish challenge. If the world were a free market, the only poor people would be the lazy or the incompetent. Sadly, that’s not the case. Poverty is a rut, hard to get out of, and a challenge to the best of abilities. The poor are often enterprising and resourceful, but are defeated by a system that protects entrenched interests, mostly in the garb of pro-poor policies. Indian experience has shown that IT is one way of bypassing crippling regulation and enabling enterprise. Kenya shows another way technology can be liberating. As I heard in this story by BBC’s Digital Planet.

Kenya is not an ideal nation. Most people don’t have a bank account, roads are not particularly safe, and the distances are substantial. And a large proportion of population depends on buying and selling goods for relatively small amounts, or remittances from people in larger cities. Without bank accounts and safe roads, it meant a greater risk, bigger cost, and therefore less business. Not any more. The largest “bank” in Kenya today is Safaricom, a telecom operator. They started a mobile money transfer service in 2007, and today its so widely used that a survey shows 83% say they will be worse off without it. (Link here)
Its called m-pesa, and it works with a combination of kiosks and text messaging. Reducing the cost, time and risk of transaction removes the inefficiency introduced by the government. That’s a small step towards lower poverty. It has the generated interest from CGAP and Gates foundation, amongst others, and there is a huge likelihood of replicating its success else where. (Like Afganistan, and Pakistan).

ITC’s e-chaupal provides very different services to indian villages. It tells them the price of their produce, amongst other things. Just these simple measures are changing lives. Just by providing information and reducing transaction costs, these applications of now-mundane technologies have a potential to pull millions out of poverty.

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